Events to watch this week…

1. The ECB meets on Thursday and we don’t expect much from policymakers despite low inflation and ECB M3 figures this morning. We saw that Flash inflation remained poor and steady in June (0.5% YoY), and ECB data on M3 Annual growth and Private Loan continue to disappoint. EURUSD recovered from its May losses and is now trading around 1.3650. The next resistance on the topside stands at 1.3672 (which corresponds to its 200-day SMA), followed by 1.3700. We would try to play the 1.3550 – 1.3670 range for the coming days, with a stop loss 50 Below/Above the range.

2. Tonight, the Reserve Bank of Australia is expected to keep its cash rate at a historical low level of 2.5%. We don’t see anything new; perhaps policymakers will try some more jawboning in order to push the Aussie down a bit. AUDUSD has remained pretty much rangy for the past few weeks, trading between 0.9330 and 0.9440. There seems to be a strong resistance zone at 0.9440/60 on the topside and it may be worth trying to sell some if the Aussie gets back to those levels for a test back towards 0.9330 (tight stop loss above 0.9480).

3. The Swedish Krona may continue to be under pressure this week ahead of the Riksbank meeting on July 3. The market is expecting the central bank to cut its benchmark rate by 25bps to 0.5% after CPI contracted by 0.2% YoY in May. Deflation is a drag and economists see it as a concern as it would only add to Sweden’s record household indebtedness. Even if the market is pretty bearish at the moment, we wouldn’t consider entering now as there is little room left. The SEK has depreciated 4.5% approximately against the Euro and the Dollar, and it may enter in an oversold area.

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